Option prices are higher than they have been in several years. Today I would like to suggest a way to capitalize on these high prices be selling some short-term premium. You might double your money in a week.
Maybe you would be unlucky and it would take two weeks to double your money (of course, there are no guarantees in the investment world, but this one looks pretty good to us).
What I am hoping is that you try this little investment, and if you are successful, you use some of your gain to join Terry’s Tips where you can get a complete education on how to generate consistent gains which could far exceed conventional investments.
Timing is everything – you act soon, you can become a Terry’s Tips Insider for a special low price (see below).
Low Cost ($180) SPY Calendar Spread Which Might Double in One Week
For the past several weeks, SPY has fluctuated in a range between $112 and $120. Right now it is resting very close to the lower end of that range. To place the spread that I am suggesting, you first need to make your best bet as to where the stock will be trading at the close of business on Friday.
Your chances of picking the right strike price are about as good as picking the right horse in a horse race, but the good thing about the calendar spread is that if your horse comes close to winning (i.e., the stock closes not too far away from your strike price choice), you can also be a winner.
When you buy a calendar spread, the maximum gain comes when the stock ends up at precisely the same price as the strike price of your spread. At that price, the short position expires worthless (or very near to it) and the long side will have more time premium than any other option in that expiration series.
Once you have made your best bet as to where the price of SPY will be next Friday, you would put this spread on placing this trade:
BTO (buy to open) 1 SPY Oct-11 115 call (SPY111022C115)
STO (sell to open) 1 SPY Oct1-11 115 call (SPY111007C115) for $1.80 (buying a calendar spread)
This sample is for the 115 strike (you might select a higher or lower strike). If you select a strike of 112 or higher, we would recommend using calls, or if lower than 112, using puts, although mathematically it makes no difference. At thinkorswim, Terry’s Tips subscribers would pay a $2.50 commission to place this spread.
The $1.80 price is what you would have had to pay last Friday. It will probably be less than this if you place the trade today or tomorrow.
You will have two opportunities to get your investment back (and hopefully, more). The first will come on Friday (October 7). You will buy back the call you sold short and sell the next-week call at the same strike. This is the trade you would make then:
BTC (buy to close) 1 SPY Oct1-11 115 call (SPY111007C115)
STO (sell to open) 1 SPY Oct2-11 115 call (SPY111014C115) for $ (selling a calendar spread)
At last Friday’s closing option prices, if the stock is trading between $113 and $116, you would be able to sell this spread for a minimum of $180. You would have all your money back, and when you made this same trade a week later (on October 21), anything you received from the sale would be pure profit.
An alternative move would be to close out the original calendar spread on October 7 rather than rolling over for another week. If the strike you selected was within $3 or $4 of the stock price on that day, you should be able to sell the spread at a profit.
This little option spread might be a way to get your feet wet in the options world, and you would learn a little about how calendar spreads work without having to wait very long to see the results. The closer your selected strike price is to the stock price when the short options expire, the greater your return.
We hope you will re-invest some of the gain you might make by taking advantage of our discounted price for new subscribers who come on board by October 11, 2011. Here is that special offer:
iPhone 5 Introduction Offer: Apple will introduce iPhone 5 on October 4. For the first time, Sprint will be able to sell an iPhone. It could be a big deal for Apple, and all of us who are betting on their stock.
On April 29, 2010, Terry’s Tips set up an actual portfolio to show how an options portfolio could outperform a stock portfolio using the same stock. We chose Apple (AAPL) as a stock that we thought would go up. On the day we set up the portfolio, AAPL was trading at $277.
In the next nine months, AAPL rose 25% and our $5000 starting portfolio value had soared to $10,087 (after all commissions, of course), a gain of over 100%.
Our options portfolio had outperformed the purchase of stock by a huge margin – gaining 4 times as much as the stock gained. Of course, the stock has now gone even higher, and our $5000 portfolio recently surpassed the $12,000 level.
We have written up a special report which shows exactly how we gained over 100% with an options portfolio while the stock rose only 25%. You could easily use this same strategy on any stock of your own choosing, and presumably do as well (assuming that you picked a stock that went higher).
This report is worth many times the price of the entire subscription by itself. Together with my White Paper, this report is a short and complete explanation of how you can use an options strategy to double your money if the stock goes up only 25%
If you sign up by October 11, one week after the iPhone 5 hits the shelves, we will discount our introductory package all the way down to $59.95, a full $20 lower than thousands of subscribers have paid.
This is what you get:
1) My 70+ page White Paper which explains my favorite option strategies in detail, including my 10 Trading Rules, and 20 companies to use with the ‘Lazy Way” Strategy, (which guarantees a 100% gain in 2 years if the stock stays flat or goes up).
2) 2 FREE months of the Options Tutorial Program (a $49.90 value), which includes:
- A 14-lesson tutorial on trading stock options which will give you a thorough understanding of trading stock options.
- A weekly update of 8 actual portfolios so that you can follow their progress over time.
- Specific trades for each portfolio emailed to you so you may mirror them in your own account.
- Access to historical analytic reports and portfolio updates posted in the Insiders section of Terry’s Tips.
- If you choose to continue after the 2 free months, do nothing, and you’ll be billed at a discounted rate of $19.95 per month.
3) A FREE special report – “How We Made 100% with Apple in 2010-11 While the Stock Rose only 25%.”
With this one-time offer, you will receive everything for only $59.95, less than the value of the White Paper alone. But you must order by October 11, 2011. Click here – http://www.terrystips.com/order.php and enter Special Code iPhone5.
Why wait? Do it today! You will learn a strategy that could pay you back many times over, and do it every year for the rest of your investing life.
P.S. Receive the special free report entitled “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%” in addition to all the other benefits of a Terry’s Tips subscription for the discounted special price of only $59.95, go to http://www.terrystips.com/order.php, and use Special Code iPhone5.
Tags: AAPL, Calendar Spreads, ETF, Free Options Report, LEAPS, Monthly Options, Options Tutorial Program, Portfolio, Puts, SPY, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, White Paper, William Tell